Avon Rubber


£508.8m market cap

1640p last close

Avon Rubber designs, develops and manufactures products in the protection (70% FY18 sales) and dairy (30%) sectors. Its major contracts are with national security organisations such as the US DoD. Over 70% of 2018 sales were from the US.

Investment summary

In its largest acquisition to date, Avon Rubber is buying the ballistic protection assets of 3M, a market leader in the US. The purchase price of an initial $91m could increase by a further $25m depending on the outcome of tenders for legacy products. Subject to approvals, the deal should complete by fiscal Q220 and be immediately earnings enhancing, creating value in FY21, its first full year of ownership. Avon has also indicated that trading remains in line with management expectations, so our forecasts remain unchanged at present. We will update our forecasts for the acquisition when it completes in FY20.

Y/E Sep
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 159.2 36.3 25.9 83.3 19.7 16.8
2018A 165.5 35.3 27.2 76.5 21.4 15.0
2019E 176.3 38.8 29.8 78.6 20.9 14.0
2020E 187.0 42.2 32.8 86.3 19.0 12.9
Last updated on 15/08/2019
Industry outlook

Avon’s long-standing, multi-level relationship with the US DoD is important to the group and the end market backdrop is supportive. The active dialogue for the M50 replenishment phase should extend the programme for at least another 15 years, plus a focus on higher price sophisticated mask systems provides a further opportunity. Meanwhile, growth has been encouraging in Farm Services, building greater visibility into the business. We maintain our view that Avon has the market position, product portfolio and strategic ambition to further accelerate its growth through organic and inorganic means.

Last updated on 15/08/2019
Share price graph
Balance sheet
Forecast net cash (£m) 61.9
Forecast gearing ratio (%) N/A
Price performance
Actual 21.1 19.7 22.4
Relative* 28.7 23.8 30.5
52-week high/low 1640.0p/1180.0p
*% relative to local index
Key management
David Evans Chairman
Paul McDonald CEO
Nick Keveth CFO

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